Back in the 1980s, writers such as Robert Reich were advocating what was called an “industrial policy”—that is, the government should intervene in the economy and explicitly help a particular industry or set of industries in order to make them more competitive.
Yes, I know this sounds like “picking winners,” except that governments have been doing this successfully for hundreds of years. Consider it as the equivalent of the Park Service being stewards of a national park, intervening when necessary to keep the ecosystem healthy. Now, think of the economy as an ecosystem, and think of industrial policy as a way to keep the economy healthy.
Robert Kuttner, writing at Huffington Post, makes the argument:
American commercial leadership in aerospace is no naturally occurring phenomenon. It reflects trillions of dollars of subsidy from the Pentagon and from NASA. Likewise, U.S. dominance in pharmaceuticals is the result of government subsidy of basic research, favorable patent treatment, and the fact that the American consumer of prescription drugs is made to overpay, giving the industry exorbitant profits to plow back into research. Throwing $700 billion at America’s wounded banks is also an industrial policy.
So if we can have implicit industrial policies for these industries, why not explicit policies to rebuild our auto industry, our steel industry, our machine tool industry, and the industries of the next century such as green energy and high-speed rail? And why not devise some clear standards for which industries deserve help, and why, and what they owe America in return?
We need to move in this direction anyway; think of it as the “public investment” part of the public investment, regulation, and carbon-pricing three-legged stool of climate-change mitigation policy. And it is probably the only way we’re going to turn around the American economy. The economy is the ecosystem, and ecosystem is the economy.
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Comments
View as Flat
Sam Wells Posted 3:25 am
23 Dec 2008
One could go as far to say that the government ruined just about any half-good idea once it got a hold of it. The Law of Unintended Consequences is the only stable factor I can see in the history of industrial revolutions - which is what you're suggesting.
But what else can we do? Plant rutabagas in everyone's lawns and parks? I too have hope that all this will work; it's just that feeling of "been there, done that." -sammie
Onward through the fog
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hapa Posted 3:34 am
23 Dec 2008
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Jon Rynn Posted 3:36 am
23 Dec 2008
So if we want to push wind, PV, high-speed rail, or whatever else, we'd do what we've done with the dirty technologies and what other countries do with their technologies. It's a question of pushing for the right technologies. In other words, picking technologies becomes part of the public discussion.
That doesn't mean just subsidies, either. It could be outright purchase, the guarantee of a market -- say, we'll buy wind farms for electricity for government buildings for 20 years, or forever, or we'll buy so many high-speed train cars every year, to assure a stable market.
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gmobus Posted 3:48 am
23 Dec 2008
Couple this with a wiser approach to governance, sapient governance (see July 20 for first in the series), and the issues of government 'choosing' winners and losers goes away.
Finally, consider the economy not just as analogous to ecology. Consider the economy as a sub-system (for the benefit of human society) within the Ecos, the Earth ecology. Please see ecological economics and biophysical economics for a more scientific perspectives on economics.
George
George Mobus,
Associate Professor, Institute of Technology,
University of Washington Tacoma,
and Professional Student for Life
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amazingdrx Posted 4:18 am
23 Dec 2008
This is precisely why economists are incapable of managing the economy. The leading lights on the leading edge of economic theory, hedge fund proffesors, have brought on worldwide financial disaster. Over simplification of a system so complex that mathematics alone can't yield useful comprehension is the problem.
Yes, a green industrial policy is necessary, now that the "free" marketeerian, greed is good non-ethic has brought us to the brink. Values must inform this policy, not just mathematics and short term, bottomline greed.
I will still be buying renewable energy stocks and selling them into earnings though, whenever the boom gets going. That's based on simple math and a simple view of greedy human nature. Hehehey.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Sam Wells Posted 7:37 am
23 Dec 2008
I really don't know if any policy wonk, even Obama, can "run" an organic economic model because it does not flow down from command decisions at the top, but works from the bottom-up in a non-linear fashion starting with us - the consumers. There is a huge difference between "creating" a million or two green jobs that are temporary and making them a permanent thing that grows and creates linkages. That takes vision, not the economics of spreading around some cash from some lame-brain gov'mint incentives, tax breaks, subsidies, grants, and cash payments, as if the US was a slice of bread you could slather peanut butter and jelly, maybe some bananas and nuts here and there.
Some people don't get the difference and that's OK, as perhaps I'm not the best writer or even more than an average thinker. As Thomas Kuhn might say, it takes a completely new paradigm and mindset. I think many of you on the Grist forum do understand aspects of the new vision, however.
What seems to be lacking is good old American Realism, that these things cannot be changed overnight, and if they change too fast they could actually backfire - I mentioned the ethanol scam earlier, a prime example of a good idea gone bonkers, and a lot of people lost fortunes on the casino-like approach to problem solving.
"Casino-like approach to problem solving." I hate to quote myself, but that's my warning to wide-eyed environmentalists who want to push the market, the technology, and the people so fast that the end result is worse than when you started. Beware!
Onward through the fog
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hapa Posted 8:26 am
23 Dec 2008
is it that false momentum like the housing bubble is something people should really watch out for? as it happens? and 99% of experts declare the critics heretical and throw them under the bus? and the 1% under the bus should feel guilty for not fighting harder to grab the steering wheel while they were aboard?
is it that modern markets are more natural, more delicate, more organic, more beautiful, more important than nature itself, and should be protected first?
is it that slow and steady adoption of cleaner living will give nuanced pleasures that outweigh ecosystem services irreparably and catastrophically damaged by decades of dishonesty and procrastination?
is it that there was a golden era of reasonable, benevolent industrial capitalism that did not chew up priceless resources and spit out indigestible waste streams, a golden time to which we should aspire to return, instead of charting a new course according to the biophysical requirements of the present?
is it that because environmentalism involves saying "no" -- and the restrictions are nearly a straightjacket now because nobody among the headcases in the head offices of the head cities wanted to hear "no" -- therefore environmentalism hates markets and consumers and innovation and the spirit of "yes"?
is it that being a consumer is a more precious american tradition than being a citizen or steward?
what is it.
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Jon Rynn Posted 8:46 am
23 Dec 2008
Hapa, 99% of experts declare the critics heretical and throw them under the bus? and the 1% under the bus should feel guilty for not fighting harder to grab the steering wheel while they were aboard?
Ain't that the truth!
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hapa Posted 9:10 am
23 Dec 2008
very american realist....
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LPS Posted 12:48 pm
23 Dec 2008
If you follow the energy, you will learn almost everything you need to know. The global economic system has strayed far from transactions of tangible value, in part due to our ability to acquire energy subsidies. It is noteworthy that M. King Hubbert himself viewed our current debt and interest system maladaptive and argued for a economic system rooted more directly in matter/energy exchanges.
It is also instructive to view human history (including prehistory) through the lens of energy flow and acquisition. It all makes so much more sense. As Mobus suggests, energy is the currency of life, a central point in Richard Heinberg's synthesis, and is one reason why peak oil (and coal) is such a compelling issue. It would be compelling even if, for example, global warming was "solved" tomorrow.
I find anthropology and human ecology far more enlightening than reading about the latest new technology that will "save" us or the latest economic instrument designed to salvage a system crushed under its own weight.
Finally, and somewhat more radonmly I suppose, there seems to me an assumption that a combination of science and technology together with "sound" economic policy will be the solution to the current human condition. If only we could act rationally. Assuming that anybody adheres to this idea, I find it to be a dubious proposition, even if we might all find examples of truly rational decision making, or believe ourselves to act more-or-less in a rational way. However, we generally do not act this way, individually or collectively, and are not even aware that we do not.
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Jon Rynn Posted 1:40 pm
23 Dec 2008
After all, for the most part it is machinery that is being powered by the energy. Oil was an annoying goop until we figured out (unfortunately) that it could be used, mainly in an internal combustion engine. Electricity was a great advance from steam engines, not just because it allowed us to have appliances, but more importantly because it allowed for a much more efficient way to use machines in factories.
Energy in the form of wood was used for heating and cooking before the industrial revolution, and water wheels and unfortunately people were used. But it was the invention of machinery, both to process and get at the sources of energy, and to actually use the energy, that led to our glorious, self-destructing civilization.
As for rationality, I don't know if you've read Jared Diamond's "Collapse", but he tries to figure out why civilizations collapse, at the end of his book detailing case studies, and in particular the most perplexing and relevant point, why do civilizations collapse when they know what's happening and how to solve their problems? One of his conclusions is that culture can be incredibly resistant to change, as for instance when the European Greenlanders refused to learn to hunt seals. But the same can be asked of us today, the most obvious, to me anyway, being the entirely cultural attachment to automobiles and planes.
But in addition, the rich and powerful are almost always resistant to change, because change usually means that they will have less power (e.g., no coal means coal companies have no power). So I would say there are two forces at work, on the mass level is culture, and on the elite level is the resistance to losing power.
Oh and Hapa, thanks for the link, there is an interesting economist Randall Wray on those threads, but it seems as if the economists there (including Krugman) have little interest in production and manufacturing, which makes the whole discussion, to me at least, somewhat untethered to reality.
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hapa Posted 2:33 pm
23 Dec 2008
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LPS Posted 2:57 pm
23 Dec 2008
What I see are the interconnections between the inherent ability to grow populations (see the evidence/debate surrounding population dynamics among hunter-gatherers), the ability to acquire food (energy) and attendant technology, and related depletions of natural resources. Intensification of production begets increases in population in cyclical patterns that lead to inevitable resource depletions. The machinery to which you speak really accelerated in the middle ages and the cycles have become increasingly aggressive and comptetive, eventually conscripting science on its behalf, for the last 500 years. As the systems become more complex, the energy needs (including the technology for harnessing that energy) are further magnified.
I have read Diamond and take a number lessons from his work. However, this "resistance" is not a conlcusion unto itself, and somehow I believe that the idea of discount rates, discussed by Nate Hagens over at TheOilDrum is somehow related. Barabara Tuchman has written about societies that apparently made decisions contrary to their own best interests.
Diamond himself traces these destructive cycles back at least to the most impressive development in all of human cultural evolution, the domestication of plants and animals and the origin of sedentary life. Marvin Harris has developed a more comprehensive analysis of these very interactions. To my mind (and even more so Diamond's), the jury is still out on the adaptive value of the neolithic stage in human cultural evolution. It is not a coincidence that following the domestication of plants and animals, heirachical social organizations, division of labor, the subserviance of the many to the few, and the origin of states, was not far behind.
But one of my main points of contention, taken largely from Harris, and buttressed by my own archaeological training (but now in physical sciences) is that all of the great changes in culture were not anticipated by the participants or informed by their aspirations. They were unconscious developments that could never have been predicted at the time. It was not their rational goal. My guess is that what the world will look like decades into the future will bear little resemblence to what we imagine, or what we desire.
Anyway, it's late. Hope to continue this on some other thread.
There are other expert analyses which I am trying to find the time to acquire and digest. First and foremost is the anthropologist Leslie White, and William Catton, cited a number of times by Heinberg.
What we have now is a massively complex arrangement made possible almost exclusively by the drawdown of ancient sunlight, the magnitude of which is staggering.
George Mobus has also though a lot about this, and I am serious about asking him for a contribution. You could do this perhaps. I'm a nobody.
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Jon Rynn Posted 3:12 pm
23 Dec 2008
So this is what occurred to me: perhaps you could say that the first stage of human life was what we could call "indigenous", and without getting into a "noble savage" illusion, say that at least there was a decent relationship with ecosystems during that period. Then we went into the "hierarchical/patriarchic" stage, which is where we are now, raping and pillaging the Earth and other humans.
The challenge, maybe best put forward in Paul Hawken's "Blessed Unrest", is how do we go to a "technological indigenous" type of civilization, that is, one that retains the indigenous understanding/sympathy with nature, but at the same time uses modern technology to survive with billions of people in a sustainable way. Anyway, that's the best I can put it late at night, to be continued.
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gmobus Posted 6:13 am
24 Dec 2008
Thanks for the endorsement! I appreciate the kind words.
Jon,
Consider energy/machines as a co-evolution process. Humans are fundamentally motivated by a need for more free energy (energy available to do the work of getting more energy!) Machines (actually all technology including agriculture) have been evolved by trial and error tinkering followed by selection for improvement in function. We select for machines that tend to increase our access to free energy (entertainment value notwithstanding). The expansion of free energy allows us to continue to tinker and improve designs.
But if one contracts the availability of energy to run our current designs one will soon see that machines are necessary but not sufficient explanations for the course of history.
Another consideration is that it is the flow of energy through the brain that allows humans to act as tinkerers and selectors.
George
George Mobus,
Associate Professor, Institute of Technology,
University of Washington Tacoma,
and Professional Student for Life
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Jon Rynn Posted 1:07 pm
24 Dec 2008
But I sort of like what maybe I can call the Greek approach. Plato made a big deal about forms, or structure; other philosophers were more enamored of substance, thus there was a discussion of form vs. substance. Then Aristotle came around and combined the two -- actually, he sort of had four (causes), including what I would consider energy, and information
And remember information? There's a whole strain of thought that considers information to be the "profound cause" (e.g., information theory).
So what's so great about humans? I think Jared Diamond wrote a whole book arguing that it was language (information), something that seems to appeal to people intuitively. But then, even our precursors in evolution used fire for energy. I think it was tools that really did the trick, and created feedback loops between the brain (information) and hands (tool-making) that really got us going (for better or worse).
Certainly, energy is an absolutely essential "cause"; but the history of life is also the history of the use of various chemicals (such as phosphorus, potassium, carbon, etc). And then of course there are the combinations into proteins, etc., and the machinery of life; so it still seems to me that a better view of economics would be multi-causal.
And by the way, if you want to make these arguments in a post, I'd be happy to put it up, or by all means ask about guest posting.
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amazingdrx Posted 4:19 pm
24 Dec 2008
To impede innovation George? As in the lack of flow of the latest information through the minds of corporate and political leaders?
How to clear the blockage?
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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gmobus Posted 7:36 am
25 Dec 2008
Regards
George
George Mobus,
Associate Professor, Institute of Technology,
University of Washington Tacoma,
and Professional Student for Life
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gmobus Posted 7:42 am
25 Dec 2008
Now I wouldn't necessarily argue that the profit motive is sufficient for our current situation. But profitability is at least a surrogate for progress.
George Mobus,
Associate Professor, Institute of Technology,
University of Washington Tacoma,
and Professional Student for Life
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amazingdrx Posted 4:20 pm
25 Dec 2008
This situation keeps getting curiouser and curiouser. US research and invention comes up with breakthrough technology, and it is manufactured elsewhere. While our industries cling to the past.
I don't think it's producing a profit.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Jon Rynn Posted 2:13 am
26 Dec 2008
Anyway, when your industrial base deteriorates, it's much harder to move innovations out of the lab and into the factory. In the 19th century, the British had exactly the same complaint about Americans that Americans have had about the Japanese and Chinese: we invent it, they sell it.
With an industrial policy that encourages the entire industrial base, as opposed to warping it with defense contracts, we'll be able to profit again from innovations.
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gmobus Posted 2:33 am
26 Dec 2008
Or possibly several things. First I think is the overemphasis on astounding profits so as to pad CEO's bonuses. Indeed executive pay structures seem to encourage really poor decision making.
Another change is globalization where labor costs have been off-shored (to improve profit performance).
As I have thought about it, I realized that American business has changed since my days in industry. We were concerned with customer satisfaction, quality, and performance of product first (sometimes crossing fingers re: profits!) My pay rate and bonus came after the fact.
One of my main theses has to do with why humans consistently make poor choices, have bad judgment re: long-term, and take foolish risks. The answer is a lack of wisdom in our society. Unfortunately Americans don't have a monopoly on foolishness (most of these bad 'deciders' are not really stupid, they are just short on judgment) The neurological basis of wisdom is the competency of the prefrontal cortex (suspect Brodmann area 10) and early evidence suggests that the average person my not have a sufficiently well developed PFC.
Judgment gets harder in more complex, dynamic environments. Our modern industrial, globalized society has probably exceeded the capacity of even the brightest business people and political leaders (e.g. the fact that Obama WANTED to be president may put his wisdom in question!) Welcome to the new evolution. What will be the selection pressure?
Question Everything
George
George Mobus,
Associate Professor, Institute of Technology,
University of Washington Tacoma,
and Professional Student for Life
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amazingdrx Posted 2:40 am
26 Dec 2008
GM killed the electric car, who knew at the time, that smooth move was a premature signal of the death of the US auto industry and the US economy along with it.
It's ressurection time, but has it gone too far? For the region around Detroit at least, it would seem so. When half the homes become vacant and the homless overflow the shelters, that's great depression times.
An immediate WW II style green car and renewable energy production effort is the only thing that can save the rest of the country going the way of the Detroit region now.
And now we have methane feedback and ice melt looming too.
No green industrial policy, it's russian-style retirement for most americans.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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amazingdrx Posted 2:49 am
26 Dec 2008
Check out this excerpt from Orlov's blog penned by a michigander:
People who commit crimes do not want to leave jail. This is a first, to prefer prison over cold and hunger. Of those unemployed that do not prefer prison life, they will do just about anything to earn a dollar. There were stories on the local news last night about these people standing out in the frigid cold suffering from frostbite for a mere $40 to hold a "going out of business" sign for yet another store going belly-up. Other women whom I had met on the net and dated in my single years (my happy years) are degenerating from once happy and secure ladies to ones full of anguish and despair. Some are begging people to let them clean their houses, some are even thinking about selling themselves. There has been a large increase in prostitution in this area.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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